"Money as Debt" - Toro, I'm hoping you can watch this and comment

Discussion in 'Economy' started by Paulie, Dec 22, 2007.

  1. Paulie
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    Paulie Platinum Member

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    Toro, I'll value your opinion the highest, but I'd like to hear anyone's take on this. It basically explains how money lending and creation started.

    It's a little long, almost 50 minutes. I'm hoping you can find that time to watch this fully, and comment on it.

    <embed style="width:400px; height:326px;" id="VideoPlayback" type="application/x-shockwave-flash" src="http://video.google.com/googleplayer.swf?docId=-9050474362583451279&hl=en" flashvars=""> </embed>
     
  2. Toro
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    Toro Diamond Member

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    Paul

    I'll get to it, but it won't be for a few days since I am tied up with Christmas stuff.

    Cheers!
     
  3. Paulie
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    Paulie Platinum Member

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    Hey, it's cool brother. I hear ya. I'm about to leave for Wisconsin for all of next week, so after I log off tonight, I probably won't even make it back onlline until next monday. No good internet connection where I'll be. Thanks for the look though. Merry X-mas. (are we still allowed to say that?)
     
  4. ronpaul2008
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    ronpaul2008 Member

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    Great summary of the current situation we are in. One thing we can do to fight this is to make sure we have no debt. As the movie says if there was no debt there would be no money. Because their money is funny money not based on value but the promise of another person to indebt themselves. This housing crisis, caused by Allen Greenspan and the Federal Reserve, took interest rates so low that caused a bubble. People who got in the bubble early may have done alright but people who got in later sometimes pledged not one but the salaries of two workers for 30 years. Greenspan made these people slaves to the bankers. If not for fractional reserve banking and other methods of creating funny money, houses would be less then a tenth of the current cost. Because one person borrows for the house, another bank ends up being able to make 9 more loans for houses, and on and on until houses are so high that people frantically try to buy a home as they see homes are becoming unaffordable. And so the price of housing, gas, education, a cup of coffee and many of the other things we spend nearly all our money on has more then tripled in the last decade but probably only the top 20% of people have had their salaries do the same during this time.

    If every person and every government is in debt to the bankers then we are all slaves. I wonder what the ratio people are in debt. Probably at least 90% of adults, 100% of governments. It wouldn't suprise me if it was over 99%. They get most people right at 18 handing out credit cards and credit lines for school related expenditures on campus. Now its no interest for 3 years to buy cars, boats, plasma tvs you name it. Americans grow up into this culture of debt. We are raised in schools funded by local governments indebting their citizens in the form of bonds. We see the boats and cars on mtv or from our aquiantences who indebted themselves to get something they normally couldn't afford. And like lemmings we slide that card and indebt ourselves to the bankers. If more people saw it as a system of slavery they would likely think twice. Our school system, itself a slave to the bankers and their money, will never teach the youth about the travesty we are in. Mainstream media, not a chance. They have done the opposite to condition us to take risks by borrowing money. Our ancestors 100 years ago were much more conservative. That people have done such stupid things to the point they are living month to month or can't make their payments even though they are hardworking and successful individuals is the result of a sophisticated brainwashing system inflicted on us to make us dependant rather then independant. Now that both parents have to work to make the house payment, the kids are left to be raised more by the government and the media which are both in debt to their masters.
     
  5. Toro
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    Toro Diamond Member

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    70&#37; of American households own their own homes. 67% owned them five years ago before the subprime debacle. During that time, the price of a home rose by 55%.

    The current net worth of all American households is $58.6 trillion. At the end of 2002, it was $38.8 trillion. "Net worth" is assets minus all debts. If you include the federal government, total financial liabilities are $9 trillion. Net financial liabilities of the government are about $6 trillion. Thus, the wealth of the country is about $53 trillion.

    So, this idea that we are all "slaves" because of debt is utterly silly.

    http://www.federalreserve.gov/Releases/Z1/current/z1r-5.pdf
     
  6. ronpaul2008
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    ronpaul2008 Member

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    If you watch the video it is claiming that money today is created from anothers debt and multiplying that initial value by the fractional reserve rate. If this is true then much of these 53trillion in 'assets' is really not assets but IOU's and bankers creating money out of thin air by lending it around in a circular process. In the movie example 11,000 is turned into 100,000 and then 900,000 in a couple legal banking transactions. So at the end someone gets a million dollar loan and buys an asset. Did the origonal wealth just magically increase by 81 times? It seems to me what happened is they devalued ie inflated the currency.
     
  7. Toro
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    Toro Diamond Member

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    I think I've seen parts of this video before then, but I'll watch it in the days ahead since Paul requested I do so. I am well aware of the problems of fiat currency. However, "money" is whatever society chooses is money. It is an intangible, determined by what people believe. Gold is nothing more than that. If gold wasn't shiny and pretty, then people a thousand or two years ago people would never have chosen it as a medium of exchange (amongst other reasons). There is nothing magical about gold other than people believe its magical. If you were take people's belief in gold away, and value it merely on its practical use, it would be worth maybe $50 an ounce.

    High-powered money is the basis for the monetary system, and a confidence and trust that the financial system will hold. It is that confidence and trust which allows for the creation of fractional banking, which allows banks and other financial institutions to extend credit beyond their monetary base. It is an unstable system, but it has also corresponded to the greatest increase in living standards in the history of humanity, and that is no accident.
     
  8. indago
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    indago VIP Member

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    Toro wrote:
    The markets giveth, and the markets taketh away...
     
  9. Paulie
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    Paulie Platinum Member

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    Toro, thanks for the insight. I know it's tough to sit and watch a movie at the computer for that long, which is why I normally wouldn't request such a thing, but this subject is important to me and you're the one here that I trust the most to be fair and knowledgable in assessing an economic situation.

    I just like this movie because it simplifies the whole scenario into layman's terms, so that anyone who doesn't have knowledge of economics and the terminology that accompanies it, can still understand the message.

    No matter what, I'm always going to have a problem with the Federal Reserve, and our current monetary policy. I don't like the idea that bankers independent of our own government, some not even from the US, control and dictate our money and economy. It undermines the constitution, it undermines sovereignty, and it keeps us from empowering ourselves.

    The way you described gold, and it's perceived worth, was spot on. My take though, is that at least gold has always held a constant steady value. There's only so much of it, and because of that, if paper money backed by it was used, there could only be so much paper money printed. I don't like that new money can be printed out of nowhere, with nothing guaranteeing it's value except 'trust'. What happens when that trust is finally lost? WE LOSE.

    The fiat system might not be such a bad thing if we weren't trying to maintain an international empire that has us so much in debt, that some nations actually ARE starting to lose their trust.

    We HAVE to stop spending so much money overseas on military escapades. I see us looking more and more like the Roman Empire everyday. We hoarded all the gold, we created a fiat monetary system, and we wage wars by borrowing and spending fake money. It was economic downfall that killed the Roman Empire, and it looks as though the same could happen to us.
     
  10. Mr.Conley
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    Mr.Conley Senior Member

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    The problem with your argument is that with a gold standard, gold's value isn't going to "h[o]ld a constant steady value." Rather, because as you said, "there's only so much of it," gold's value will dramatically increase as the economy grows. This is bad, and here's how:

    As the economy gets larger and larger we need more and more money to grease the engine so to speak. In a gold-backed economy there's only two ways to respond to the need for more cash: 1. find more gold (pretty hard if not impossible given the quantity we're talking about) or 2. increase the value of the gold we have. 1. is pretty much impossible, so 2. becomes our only option other than recession/depression. What this means is that as long as the economy continues growing, the value of gold is going to have to keep on increasing. If gold was worth (for example) $1000 in 2010, then deflationary pressure- or government fiat- will dramatically increase the value with each passing year. Within a few years, gold could easily triple, quadruple several times over. This deflation HAS to happen in a gold-backed, growing economy or else there wouldn't be enough cash.

    The problem with this scenario is that the deflationary pressure on gold will severely discourage investment and spending. In a gold backed economy why lend money, even at interest, when I can increase the value of my holdings by simply not spending it? Under the current system, if you want to increase the value of your assets you HAVE to invest- just like banks currently do. If you invest wisely, then you can dramatically increase your holdings, but your investment has the added side effect of encouraging growth, creating jobs, spurring innovation, etc. etc. In a gold-backed system investors have no reason to invest, loan, or buy because their gold holding will, due to the inherent nature of the system, inexorably increase. If anything, a gold standard system discourages investment. The deflationary pressure on the currency would make repaying loans almost impossible, so why loan at all. Once people realize this simple truth then, rather than invest, speculators and anyone with a brain is going to sit on their gold and watch it's value spiral upward. That's great for the individual speculators, but the economy will hit the tanker because suddenly there's no currency anymore.

    Ultimately you'll find yourself enslaved to a very small, influential group of people who stocked up on gold beforehand, then waited while deflation exponentiates the value of their holdings with absolutely no effort on their part, and to the detriment of every other member of the economic system.
     

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